Charging off debt doesn’t end right to collect

By Dave Ramsey

Published 5:45 am, Sunday, October 4, 2015

Image 1of/1

Caption

Close

Image 1 of 1

Dave Ramsey

Dave Ramsey

Charging off debt doesn’t end right to collect

1 / 1

Back to Gallery

DEAR DAVE: If a credit card company has charged off a debt, can they still sell that debt to someone else who can come after it? I’m currently receiving calls about a debt that’s more than 20 years old. Do you have any suggestions? — Lisa

DEAR LISA: Charging off a debt doesn’t mean that the right to collect has been given up or revoked. All it means is that the debt is no longer on their books as an asset. They don’t think they’re going to collect, but it doesn’t mean that the legal right to collect has ended.

The real problem here is whether or not the debt is outside the statute of limitations. I’m guessing that after 20-something years it has passed, but check with a lawyer in your state to make sure. Another issue is when someone buys and tries to collect on a 20-year old credit card debt, they paid about five cents on the dollar for it. These debt collectors are the worst type of bottom feeders.

If they call, just hang up on them unless they’re willing to be respectful and reasonable. You can probably settle this for 10 or 15 cents on the dollar, and get them out of your life for good.

DEAR DAVE: My husband and I have a disagreement on whether or not you would recommend buying a home warranty to cover appliance repair. I’ve read your books, and I think you’d say no. He thinks you believe it’s a good idea. Can you settle this for us? — Crystal

DEAR CRYSTAL: No, I wouldn’t recommend it. I don’t buy warranties of any kind, and here’s why. Warranties are usually based on somewhere between 12 and 18 percent of the cost of the warranty actually going to the probability of the repair. The rest is eaten up in profit, overhead and marketing costs. In other words, for 18 percent of what you pay — give or take — you could put that money aside, and on average you could cover the repair.

I don’t buy extended warranties, either. Whether you’re talking about something on a home, car or other item, these are the types of things you should be able to self-insure against with your emergency fund of three to six months of expenses. Besides that, if you can’t afford to fix something you bought if something goes wrong, then you couldn’t afford to buy that item in the first place!

So, put the profit, overhead, marketing costs and all that in your pocket. Make that extra money you made!

* Dave Ramsey is America's trusted voice on money and business. He has authored five New York Times best-selling books. The Dave Ramsey Show is heard by more than 8.5 million listeners each week on more than 550 radio stations. Dave's latest project, EveryDollar, provides a free online budget tool. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.